Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
As of December 29, 2017,
the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common
stock held by non-affiliates was approximately $9,286,813 based upon a total of 4,486,383 shares of Class A common stock held
by non-affiliates and a closing price of $2.07 per share for the Class A common stock as reported on The NASDAQ Capital Market.
Shares held by each executive officer, director and by each person who owns 10% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares outstanding
with respect to each of the classes of our common stock, as of October 10, 2018, is set forth below:
This Amendment No. 1 on Form 10-K/A (the
“Amendment”) amends the Annual Report on Form 10-K of Truett-Hurst, Inc. (the “Company”) for the fiscal
year ended June 30, 2018, originally filed with the Securities and Exchange Commission (the “SEC”) on October 15, 2018
(the “Original Filing”). We are filing this Amendment (i) to amend Part III of the Original Filing to include information
previously omitted in reliance upon General Instruction G(3) to Form 10-K and (ii) to file the current Bylaws of the Company, as
amended, and to make corresponding updates to the Exhibit Index. In accordance with the Rule 12b-15 of the Exchange Act, we are
also including as exhibits the current certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.
Except as described above, no other changes
have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have
not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original
Filing other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the
Original Filing and our other filings made with the SEC on or subsequent to October 15, 2018. In this Amendment, unless the context
indicates otherwise, the terms “company,” “we,” “us,” and “our” refer to Truett-Hurst,
Inc. Other defined terms used in this Amendment but not defined herein shall have the meaning specified for such terms in the Original
Filing.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
The following persons are our current directors and executive officers
and hold the positions set forth below:
Name
|
|
Age
|
|
Principal Position
|
|
Director Since
|
Marcus Benedetti
(1)(2)
|
|
43
|
|
Director
|
|
2014
|
Daniel A. Carroll
(1)(3)
|
|
58
|
|
Director
|
|
2012
|
Paul E. Dolan, III
|
|
68
|
|
Director
|
|
2012
|
Barrie Graham
(2)(3)
|
|
70
|
|
Director
|
|
2012
|
Spencer Grimes
(3)
|
|
52
|
|
Director
|
|
2017
|
Gerry Hansen
(1)(2)
|
|
64
|
|
Director
|
|
2018
|
Philip L. Hurst
|
|
55
|
|
President, Chief Executive Officer and Director
|
|
2013
|
Karen Weaver
|
|
57
|
|
Chief Financial Officer and Secretary
|
|
n/a
|
(1) Audit Committee member
(2) Compensation Committee member
(3) Nominating and Governance Committee member
Marcus Benedetti.
Marcus
Benedetti is President and Chief Executive Officer of Clover Stornetta Farms Inc. (“Clover”). Clover is a leading manufacturer
and distributor of milk and dairy products in California, Nevada and Arizona, known for sustainable agricultural practices and
non-GMO, non-RBST products. Mr. Benedetti joined Clover in 2000 and was named CEO and a Board Member in 2006. Mr. Benedetti serves
as a Board member of the Association of Independent Dairies of America, the Dairy Institute of California, and as an honorary advisory
Board member for the UC Davis Agriculture Sustainability Institute, Community Foundation of Sonoma County and Social Advocates
for Youth. Mr. Benedetti holds a Business of Administration degree from the University of Alaska. The Nominating and Governance
Committee selected Mr. Benedetti to serve on our Board due to his wealth of knowledge and experience developing, producing and
selling consumer products to retailers in the western United States.
Daniel A. Carroll.
Dan
Carroll has served as a partner/managing director of TPG Capital L.P. from 1995 to present. He has served on the Board of Shenzhen
Development Bank (China) (2005-2010), Myer Department Stores, Ltd (Australia) (2006-2009), Bank Thai, Ltd (Thailand) (2007-2009)
and Healthscope Australia (2010-2011). Mr. Carroll received a Bachelor of Arts from Harvard University in 1982 and a Master of
Business Administration from Stanford University Graduate School of Business in 1986. Mr. Carroll has served as a managing member
of H.D.D. LLC (“LLC”) and a Director of Truett-Hurst, Inc. since 2012. The Nominating and Governance Committee and
the Board selected Mr. Carroll to serve on our Board due to his extensive experience in executive management oversight, private
equity, capital markets and transactional matters.
Paul E. Dolan, III.
Paul
E. Dolan, III has been involved in the wine business since 1975 and is considered the founding father of organics and biodynamic
in the California wine industry. Mr. Paul Dolan started his winemaking career with what was then a small winery in Mendocino, Fetzer
Vineyards, in 1977 and then helped the Fetzer family grow to one of the premier California wineries, selling over three million
cases. Mr. Paul Dolan managed the company as President for the new owners, the Brown-Forman Corporation, from 1992 to 2002. He
has served as Chairman of the Wine Institute (1990-2012) and became the first Chairman of the Sustainable Winegrowers Alliance
(2002-2003). Mr. Dolan holds a Bachelor of Arts in Finance from the University of Santa Clara and a Master of Science in Enology
from the University of California-Fresno. Mr. Paul Dolan is also author of True to Your Roots: Fermenting a Business Revolution.
Mr. Paul Dolan has served as a managing member of the LLC since 2010 and a Director of Truett-Hurst, Inc. since 2012. The Nominating
and Governance Committee and the Board selected Mr. Paul Dolan to serve on our Board due to his extensive knowledge of our business,
which he gained as one of our founders, as well as his experience in building wine companies and leadership in developing and promoting
sustainable farming techniques.
Barrie Graham.
Barrie
Graham has over 25 years of experience in commercial and investment banking. Mr. Graham served as Chief Operating Officer of WR
Hambrecht & Co. (2011-2013); President, Chief Executive Officer and Director of Exchange Bank (1995-2008), and as a Senior
Manager at Wells Fargo (1985-1995). Mr. Graham is a former Director and past-Chairman of the Pacific Coast Banking School at the
University of Washington-Seattle (1998-2011, Chairman 2009-2010), a former Director of the California Bankers Association (2004-2008),
a former President and Chief Executive Officer of hybridCore Homes (2009-2011). Mr. Graham is Chairman of the Marines Memorial
Association in San Francisco, a Director of Empire Law School (2004-Present) and serves on numerous other non-profits. Mr. Graham
is a former Marine Infantry Officer and has served as a managing member of the LLC since 2011 and a Director of Truett-Hurst, Inc.
since 2012. The Nominating and Governance Committee and the Board selected Mr. Graham to serve on our Board due to his experience
in executive management oversight, accounting and financial transactions.
Spencer Grimes
.
Spencer Grimes is Managing Partner of Twinleaf Management LLC, a Connecticut-based investment advisor (“Twinleaf”).
Twinleaf constructs and manages client portfolios with an exclusive focus on undervalued small capitalization equities. Twinleaf
currently owns approximately 9.68% of the Company’s shares of Class A common stock. See “Security Ownership of Certain
Beneficial Owners and Management” below. Prior to founding Twinleaf in 2011, Mr. Grimes was a private equity investor at
BG Media Partners and Sequence LLC. From 1996 to 2000, he was an equity research analyst at Citigroup Smith Barney. Early in his
career, he held sales and marketing positions at Viacom, Inc., a global entertainment company. Mr. Grimes is also currently an
adjunct professor at The New School in New York, teaching a graduate level finance course. He holds a Bachelor of Arts from the
University of Virginia and a Masters of Business Administration from Emory University in Atlanta. The Nominating and Governance
Committee and the Board selected Mr. Grimes to serve on the board due to his experience in executive management oversight and finance.
He is a board director at The Meet Group, Inc. (Nasdaq: MEET).
Gerry Hansen.
Gerry
Hansen has served as an Executive Coach and Consultant since 2008 with Hansen Coaching and Consulting. Previously, Ms. Hansen served
in various roles at Charles Schwab & Co, Inc. and Charles Schwab Europe from 1994-2000, including Senior Vice President, in
which she had responsibility for a variety of financial, accounting and operating functions. Ms. Hansen is the Audit Committee
chairwoman and the Audit Committee’s financial expert. The Nominating and Governance Committee and the Board selected Ms.
Hansen to serve on our Board due to her financial, accounting and executive management oversight experience.
Phillip L. Hurst.
Phillip
L. Hurst began his career in the wine industry in 1985 at Fetzer Vineyards when he was hired by Paul Dolan to help make premium
wines and build the brand. Fetzer Vineyards was sold to the Brown-Forman Corporation in 1992, and Mr. Hurst left in 1998 to run
International Sales and Marketing for Golden State Vintners, Inc. which needed to bolster the senior management team for the launch
of its initial public offering. During his time at Golden State Vintners, Inc. (1998-1999), Mr. Hurst met his future partners in
what was to become one of the world’s largest private label beer, wine and spirits companies, Winery Exchange Inc. As co-founder
and Senior Vice President of Sales and Marketing from 1999 to 2007, he helped grow the company to over $100 million in sales in
less than 10 years. Mr. Hurst sold his stake in the company to partner with his longtime friend and mentor, Paul Dolan, to follow
their dream of buying and building super-premium wineries and vineyards in California’s premier appellations. Mr. Hurst has
a winemaking degree from University of California-Davis. Mr. Hurst has served as President, Chief Executive Officer and a managing
member of the LLC since 2007 and as President, Chief Executive Officer and Director of Truett-Hurst, Inc. since 2012. The Nominating
and Governance Committee and the Board selected Mr. Hurst to serve on our Board due to his extensive knowledge of our operations,
competitive challenges and opportunities gained through his position as our President and Chief Executive Officer as well as his
extensive experience and education in winemaking.
Karen Weaver.
Karen Weaver has served as Chief Financial Officer of Truett-Hurst, Inc. since 2018 and has served as Vice President, Corporate
Controller of the Company since December 18, 2017. Prior to joining Truett-Hurst, Inc., Ms. Weaver was previously employed by Amyris,
Inc. (“Amyris”), a publicly-traded biotechnology company delivering renewable products through its science technology
as Vice President and Corporate Controller from October 2012 until September 2014 and Vice President, Finance from September 2014
until her departure on December 15, 2017. On August 1, 2013, Ms. Weaver was appointed Principal Accounting Officer of Amyris. From
September 2009 until February 2011, Ms. Weaver served as Vice President and Corporate Controller of Sonic Solutions (“Sonic”),
a publicly-traded global digital media software and entertainment solutions provider. At Sonic, Ms. Weaver oversaw the global finance
team and was involved in Sonic’s mergers and acquisitions activities. Ms. Weaver has approximately 30 years of management,
leadership and industry experience, and has led finance functions for varying stages of companies from early stage to public companies
with domestic and foreign operations in the technology, biotechnology, manufacturing and financial services industries.
Committees and Meetings of the Board of Directors
Board Committees
Our Board of Directors
has established an Audit Committee, a Compensation Committee and Nominating and Governance Committee, which have the composition
and responsibilities described below. Each committee operates under a charter that has been approved by the Board of Directors
and current copies of these charters are posted on our website, https://www.truetthurstinc.com/corporate-governance. The information
on our website is not incorporated by reference and is not part of this Form 10-K/A.
Audit Committee
We have a separately-designated
standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.
Our Audit Committee is composed of Marcus Benedetti, Daniel A. Carroll and Gerry Hansen. All are non-employee members of our Board
of Directors. Ms. Hansen is our Audit Committee chairwoman. Ms. Hansen is considered an “audit committee financial expert,”
as currently defined under the SEC and NASDAQ rules. Our Board of Directors has determined that Mr. Benedetti, Mr. Carroll and
Ms. Hansen are independent within the meaning of the applicable SEC rules and the listing standards of NASDAQ.
Our Audit Committee oversees
our corporate accounting and financial reporting process. Among other matters, the Audit Committee evaluates the independent registered
public accounting firm’s qualifications, independence and performance; determines the engagement of the independent registered
public accounting firm; reviews and approves the scope of the annual audit and the audit fee; discusses with management and the
independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;
approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;
monitors the rotation of partners of the independent registered public accounting firm on our engagement team as required by law;
reviews our critical accounting policies and estimates; and will annually review the Audit Committee charter and the committee’s
performance. The Audit Committee operates under a written charter adopted by the Board of Directors that satisfies the applicable
standards of NASDAQ.
Compensation Committee
Our Compensation Committee
is composed of Marcus Benedetti, Barrie Graham and Gerry Hansen. Mr. Graham is our Compensation Committee chairman.
Our Compensation Committee
reviews and recommends policies relating to the compensation and benefits of our officers. The Compensation Committee reviews and
approves corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers,
evaluates the performance of these officers in light of those goals and objectives, and makes recommendations to the Board regarding
compensation of these officers based on such evaluations. The Compensation Committee will administer the issuance of stock options
and other awards under our stock plans. The Compensation Committee reviews and evaluates, at least annually, its own performance.
The Compensation Committee operates under a written charter adopted by the Board that satisfies the applicable standards of NASDAQ.
Nominating and Governance Committee
Our Nominating and Governance
Committee is composed of Daniel A. Carroll, Barrie Graham and Spencer Grimes, and Mr. Carroll is our Nominating and Governance
Committee chairman. Our Nominating and Governance Committee is responsible for making recommendations regarding candidates for
directorships and the size and the composition of our Board. In addition, the Nominating and Governance Committee is responsible
for overseeing our corporate governance principles and making recommendations concerning governance matters. The Nominating and
Governance Committee operates under a written charter adopted by the Board that satisfies the applicable standards of NASDAQ.
The Nominating and Governance
Committee’s purpose is to monitor and oversee matters of corporate governance, including the evaluation of the Board’
performance and processes and the “independence” of directors, and select, evaluate and recommend to the Board qualified
candidates for election or appointment to the Board. The Nominating and Governance Committee identifies director candidates through
recommendations made by members of the Board, management, stockholders and others, including the possibility of a search firm.
The Nominating and Governance Committee does consider nominations from its stockholders made pursuant to Section 2.10 of our bylaws.
The applicable procedures from Section 2.10 of our bylaws include, but are not limited to, the following. Stockholders wishing
to submit nomination recommendations to the Nominating and Governance Committee should review Section 2.10 of our bylaws in their
entirety as the below summary is incomplete.
|
·
|
Timeliness
. To be timely, notice by the stockholder
must be delivered to the Secretary at the Corporation’s principal executive offices not later than 90 days prior to the
date of the annual meeting.
|
|
·
|
Substance of Notice
. The stockholder’s notice
relating to director nomination(s) must set forth, among other things more fully discussed in Section 2.10 of our bylaws, the
following:
|
|
o
|
as to
each person whom the stockholder proposes
to nominate for election or re-election as a director
, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation which
are beneficially owned by the person, (iv) a statement whether such person, if elected, intends to tender a resignation effective
upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face
re-election and upon acceptance of such resignation by the Board of Directors and (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange
Act; and
|
|
o
|
as to
the stockholder giving the notice
,
(i) the name and record address of the stockholder, and (ii) the class and number of shares of the Corporation which are beneficially
owned by the stockholder.
|
At a minimum, a Board
nominee should have significant management or leadership experience which is relevant to the Company’s business, as well
as personal and professional integrity. The Board believes it is in the best interest of the Company and its stockholders to identify
and select highly-qualified candidates to serve as directors and for the Board to be comprised of a diverse group of individuals
with different backgrounds and perspectives. Recommendations are developed based on the nominee’s own knowledge and experience
in a variety of fields, and research conducted by the Company’s staff at the Nominating and Governance Committee’s
direction.
Board Meetings and Attendance
There were thirteen meetings
held by the Board of Directors for the fiscal year ended June 30, 2018. The Audit Committee had eight meetings, the Compensation
Committee had three meeting and the Nominating & Governance Committee had one meeting in the fiscal year ended June 30, 2018.
The Board of Directors requires that directors make a reasonable effort to attend the Company’s annual stockholder meeting.
Board Role in Risk Oversight
Our Board as a whole has
responsibility for overseeing our risk management. The Board exercises this oversight responsibility directly and through its committees.
The oversight responsibility of the Board and its committees is informed by reports from our management team that are designed
to provide visibility to the Board about the identification and assessment of key risks and our risk mitigation strategies. The
full Board has primary responsibility for evaluating strategic and operational risk management, and succession planning. Our Audit
Committee has the responsibility for overseeing our major financial and accounting risk exposures and the steps our management
has taken to monitor and control these exposures, including policies and procedures for assessing and managing risk. Our Audit
Committee also reviews programs for promoting and monitoring compliance with legal and regulatory requirements. Our Compensation
Committee evaluates risks arising from our compensation policies and practices. The Audit Committee and the Compensation Committee
provide reports to the full Board regarding these and other matters.
Stockholder Communications with the Board of Directors
Stockholders may send
communications to our Board, including any individual director or the directors as a group, by mailing such communications to Truett-Hurst,
Inc., P.O. Box 1532, Healdsburg, California 95448, and Attention: Corporate Secretary. Such correspondence shall be addressed to
the Board or any individual director by either name or title.
All communications received
as set forth in the preceding paragraph will be opened by our Acting Corporate Secretary for the sole purpose of determining whether
the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product
or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to our Board
or any individual director, our Corporate Secretary will make sufficient copies of the contents to send to each director to which
the envelope is addressed.
Code of Business Conduct and Ethics
We have adopted a Code
of Business Conduct and Ethics that applies to all of our directors, officers and employees, including the Chief Executive Officer
and Chief Financial Officer. These individuals are required to abide by the Code of Business Conduct and Ethics to ensure that
its business is conducted in a consistently legal and ethical manner. Our Code of Business Conduct and Ethics covers all areas
of professional conduct, including employment policies, conflicts of interest, intellectual property and the protection of confidential
information, as well as strict adherence to all laws and regulations applicable to the conduct of its business. Any waivers of
the Code of Business Conduct and Ethics for directors or executive officers must be approved by the Board. The full text of our
Code of Business Conduct and Ethics is published on our website at https://www.truetthurstinc.com/corporate-governance. A hardcopy
can be requested via mail to our P.O. Box, attention: Corporate Matters, and will be mailed without charge. P.O. Box 1532, Healdsburg,
CA 95448.
We intend to disclose
future amendments to, or waivers from, provisions of its Code of Business Conduct and Ethics on our website within four business
days following the date of such amendment or waiver.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires our directors and officers, and persons who beneficially own more than ten percent (10%) of our common stock, who
are hereinafter collectively referred to as the Reporting Persons, to file with the SEC reports of beneficial ownership and reports
of changes in beneficial ownership of our common stock on Forms 3, 4 and 5. Reporting Persons are required by applicable SEC rules
to furnish us with copies of all such forms filed with the SEC pursuant to Section 16(a) of the Exchange Act. To our knowledge,
based solely on our review of the copies of the Forms 3, 4 and 5 received by us during the fiscal year ended June 30, 2018 and
written representations that no other reports were required, we believe that all reports required to be filed by such persons with
respect to the Company’s fiscal year ended June 30, 2018, were timely filed, except that, due to an administrative oversight,
Karen Weaver filed a late Form 3.
ITEM 11. EXECUTIVE COMPENSATION
Our executive compensation
program is straightforward. We provide our executives with an annual base salary as a fixed, stable form of compensation and an
annual cash bonus opportunity to create additional performance incentives. We also from time to time grant our executives equity-based
awards to provide an additional incentive to grow our business and further link their interests with those of our stockholders.
Our Compensation Committee reviews our executive officers’ overall compensation packages on an annual basis or more frequently
as it deems warranted.
As a “smaller reporting
company” (as such term is defined under applicable securities laws), we are required to disclose the compensation for our
principal executive officer and our two other most highly compensated executive officers serving as of the last day of the applicable
fiscal year. In certain cases, disclosure may also be required for individuals who served as executive officers for a portion of
the fiscal year but were not serving as executive officers at the end of the year.
The table below sets forth
the annual compensation for services rendered during fiscal 2018 and, to the extent applicable under SEC rules, fiscal 2017 by
Phillip L. Hurst, our President and Chief Executive Officer, Karen Weaver, our Chief Financial Officer, Jason J. Strobbe, our former
Executive Vice President of Sales, and Evan B. Meyer, our former Chief Financial Officer. These individuals are referred to as
our “named executive officers.”
As previously disclosed
in the Current Reports on Form 8-K filed with the SEC on August 16, 2018 and October 15, 2018, Mr. Hurst has resigned as President
and Chief Executive Officer effective November 1, 2018 and Paul E. Dolan, III has been appointed as the Company’s President
and Chief Executive Officer, effective as of such date, at a base salary for Mr. Dolan of $200,000 per year during his service
as the Company’s President and Chief Executive Officer.
Summary Compensation Table - Fiscal 2017-2018
Name and Principal Position
|
|
|
Fiscal
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
|
Option
Awards
($)(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)(1)
|
|
|
All Other
Compensation
($)(3)
|
|
|
Total
($)
|
|
Phillip L. Hurst(4)
|
|
|
2018
|
|
|
|
315,927
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,800
|
|
|
|
326,727
|
|
President and Chief Executive Officer
|
|
|
2017
|
|
|
|
322,351
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,800
|
|
|
|
333,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Weaver(5)
|
|
|
2018
|
|
|
|
111,538
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
116,538
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason J. Strobbe(6)
|
|
|
2018
|
|
|
|
277,443
|
|
|
|
25,000
|
|
|
|
112,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
415,243
|
|
Former Executive Vice President - Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evan B. Meyer(7)
|
|
|
2018
|
|
|
|
317,445
|
|
|
|
32,488
|
|
|
|
110,448
|
|
|
|
67,500
|
|
|
|
-
|
|
|
|
188,924
|
|
|
|
716,805
|
|
Former Chief Financial Officer
|
|
|
2017
|
|
|
|
182,983
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,500
|
|
|
|
-
|
|
|
|
31,600
|
|
|
|
295,083
|
|
|
(1)
|
The amounts reported in the “Bonus” column represent discretionary cash bonuses awarded
to our executives during fiscal 2018. No bonuses were paid under our executive bonus plan described below for fiscal 2017 or fiscal
2018.
|
|
(2)
|
The amounts reported in these columns represent the aggregate grant date fair value of stock and
option awards granted to the named executive officers in the applicable fiscal year (and, in the case of Mr. Meyer, the incremental
value of certain awards that accelerated in connection with his termination as referred to in note (7) below). These values have
been determined under the principles used to calculate the value of equity awards for purposes of our financial statements. For
a discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of
equity-based awards contained in Note 9, Stock-Based Compensation, to our consolidated financial statements for the year ended
June 30, 2018 included in our Annual Report on Form 10-K, filed with the SEC on October 15, 2018 (or, for awards granted prior
to fiscal 2018, the corresponding note to our consolidated financial statements for the applicable fiscal year).
|
|
(3)
|
The amounts reported in the “All Other Compensation” column for 2018 include, for Mr.
Hurst, an automobile allowance of $900 a month and, for Mr. Meyer, $42,450 in housing costs paid by the Company
|
|
(4)
|
In August 2018, the Company announced that Mr. Hurst will resign from his position as the Company’s
Chief Executive Officer and President, effective November 1, 2018.
|
|
(5)
|
Ms. Weaver commenced employment with the Company on December 18, 2017 and was appointed as the
Company’s Chief Financial Officer effective April 27, 2018.
|
|
(6)
|
Mr. Strobbe commenced employment with the Company on May 9, 2016 and was appointed as an executive
officer of the Company effective January 1, 2018. Mr. Strobbe’s employment with the Company terminated effective August 31,
2018.
|
|
(7)
|
Mr. Meyer commenced employment with
the Company effective October 26, 2016. His employment with the Company terminated effective
March 30, 2018. The amount in the “Salary” column for Mr. Meyer includes
$3,600 for the payment of his accrued paid time off upon his termination, and the amount
in the “All Other Compensation” column includes $144,500 cash severance and
$1,974 for COBRA premiums paid by the Company following the termination of his employment
as described below under “Separation Agreement.” The amounts in the “Stock
Awards” and “Option Awards” columns reflect both (a) the grant date
fair values of awards of restricted stock units and stock options, respectively, granted
to Mr. Meyer during fiscal 2018 and (b) the incremental fair values attributable to the
acceleration of Mr. Meyer’s then-outstanding awards of restricted stock units and
stock options, respectively, in connection with the termination of his employment during
fiscal 2018 as described below under “Separation Agreement.”
|
Outstanding Equity Awards as of June 30, 2018
The following table provides information regarding
outstanding equity awards held by each of our named executive officers as of June 30, 2018, including the vesting dates for the
portions of these awards that had not vested as of that date.
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested(#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested($)(1)
|
|
Phillip L. Hurst
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Weaver
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason J. Strobbe
|
|
|
5/9/2016
|
|
|
|
35,000
|
|
|
|
35,000
|
(2)
|
|
$
|
1.53
|
|
|
|
5/9/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(3)
|
|
$
|
98,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evan B. Meyer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
The dollar amounts shown in this column are determined by multiplying the applicable number of
shares or units by $1.64, the closing price of the Company’s common stock on the NASDAQ Global Select Market on June 29,
2018 (the last trading day of fiscal 2018).
|
|
(2)
|
The unvested portion of this option vests in two annual installments, with the first such installment
vesting on May 9, 2019.
|
|
(3)
|
These unvested RSUs consist of (i) an award of 10,000 RSUs that vest in four annual installments,
with the first such installment vesting on October 30, 2018, and (ii) an award of 50,000 RSUs that vest upon a change in control
of the Company.
|
Executive Employment and Severance Agreements
We entered into an offer letter with Ms. Weaver
in November 2017 in connection with her joining the Company. Her offer letter was amended in July 2018. As amended, the letter
provides for Ms. Weaver to receive an initial annual base salary of $200,000 and to be eligible for an annual bonus of up to 20%
of her salary. She would also be entitled to severance of six months of her base salary if her employment is terminated by the
Company in connection with a sale of a majority interest in the Company or a going private transaction. In addition, if Ms. Weaver's
employment is terminated by the Company without cause prior to December 31, 2018, she will be entitled to a severance payment equal
to the amount of base salary she would have received for the period from her termination of employment through December 31, 2018
had her employment not terminated.
We entered into an offer letter with Mr. Meyer
in September 2016 that provided for him to receive an initial base salary of $275,000 and an annual bonus of 20% of the bonus pool
established each year under our executive bonus plan described below. The letter also provided for Mr. Meyer to receive a grant
of 70,000 stock options upon joining the Company. If a majority interest in the Company was sold and Mr. Meyer’s employment
was terminated due to the sale within the first 18 months of his employment with the Company, he would be entitled to severance
equal to 12 months of his initial base salary. As noted above, Mr. Meyer’s employment with us terminated effective March
30, 2018.
We entered into an offer letter with Mr. Strobbe
in April 2016 that provided for him to receive an initial base salary of $250,000 and eligibility to participate each year in our
executive bonus plan described below. The letter also provided for Mr. Strobbe to receive a grant of 70,000 stock options upon
joining the Company. As noted above, Mr. Strobbe’s employment with us terminated effective August 31, 2018.
Executive Bonus Plan
We provide our named executive officers the
opportunity to receive a cash incentive bonus each fiscal year under our executive bonus plan. Under the plan, a bonus pool equal
to 50% of our net income for the fiscal year (up to a maximum pool amount of $500,000) is established, and each participant in
the plan is entitled to receive a specified percentage of the pool, subject to the participant’s continued employment with
the Company in good standing through the bonus payment date. For fiscal 2018, Mr. Hurst was eligible to receive a 25% share of
this bonus pool, and Mr. Meyer was eligible to receive a 20% share of this bonus pool pursuant to his offer letter described above.
The Company determined that no bonuses would be awarded under the plan for fiscal 2018 as the Company did not have positive net
income for the year.
Equity Incentive Plan
From time to time, the Company grants equity
incentive awards to our named executive officers and other selected employees. Such awards are granted under, and is subject to,
the terms of the Company’s 2012 Stock Incentive Plan (the “2012 Plan”). The 2012 Plan is administered by the
Compensation Committee of our Board of Directors. The Compensation Committee has authority to interpret the plan provisions and
make all required determinations under the 2012 Plan (including making appropriate adjustments to reflect stock splits and similar
events). Employees, directors and consultants of the Company and its subsidiaries and affiliates are eligible for award grants
under the 2012 Plan. Awards of stock options, stock appreciation rights, restricted stock, restricted stock units and other awards
may be granted under the plan.
Awards granted under the 2012 Plan are generally
only transferable to a beneficiary of a named executive officer upon his death. However, the Compensation Committee may establish
procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable securities
laws and, with limited exceptions set forth in the plan document, are not made for value.
Under the terms of the 2012 Plan, if there
is a change in control of the Company, outstanding awards granted under the plan (including awards held by our named executive
officers) will generally terminate unless the Compensation Committee provides for the substitution, assumption, exchange or other
continuation of the outstanding awards. The Compensation Committee has discretion to provide for outstanding awards to become vested
in connection with the change in control transaction.
In July 2017, we granted Mr. Meyer 50,000 options
with an exercise price of $2.08 per share and a maximum term of 10 years (subject to early termination in connection with a termination
of Mr. Meyer’s employment of a change in control of the Company). The option was 25% vested upon grant, and the remaining
75% vested in three annual installments thereafter. In October 2017, we granted to each of Mr. Meyer and Mr. Strobbe an award of
10,000 restricted stock units that vests in four annual installments and an award of 50,000 restricted stock units that vests if
a change in control of the Company occurs during the executive’s employment with the Company. Each unit represents the right
to receive a share of the Company’s Class A common stock upon vesting of the unit.
In July 2018, we granted Ms. Weaver an award
of 60,000 restricted stock units that vests in one installment on July 11, 2019 or, if earlier, upon a sale of the Company or repurchase
of a majority of the Company’s Class A common stock.
Other Benefits
The named executive officers are entitled to
participate in the Company’s health and welfare plans on the same terms as other employees generally. We also do not provide
any material perquisites to our executives, other than a car allowance of $900 per month to Mr. Hurst and certain housing benefits
as we deem appropriate from time to time.
We also provide all full-time employees, including
our named executive officers, with the opportunity to participate in a defined contribution 401(k) plan. Our 401(k) plan is intended
to qualify under Section 401 of the Internal Revenue Code so that employee contributions and income earned on such contributions
are not taxable to employees until withdrawn. Employees may elect to defer a percentage of their eligible compensation (not to
exceed the statutorily prescribed annual limit) in the form of elective deferral contributions to our 401(k) plan. Our 401(k) plan
also has a “catch-up contribution” feature for employees aged 50 or older (including those who qualify as “highly
compensated” employees) who can defer amounts over the statutory limit that applies to all other employees. Currently, we
make matching contributions of 25% of an employee’s deferrals up to 4% of the employee’s eligible compensation under
the plan.
Separation Agreements
As noted above, Mr. Meyer’s employment
with the Company terminated effective March 30, 2018. In connection with his termination, the Company and Mr. Meyer entered into
a separation agreement that provided for him to receive a cash severance payment of $144,500, to be paid in two monthly
installments, and payment of his COBRA premiums for continuation of health benefits for up to six months. In addition, Mr. Meyer’s
outstanding equity-based awards granted by the Company that were unvested on the date of his termination became fully vested and,
in the case of options, exercisable. The separation agreement also includes Mr. Meyer’s release of claims and certain
other covenants in favor of the Company.
As noted above, Mr. Strobbe’s employment
with the Company terminated effective August 31, 2018. In connection with his termination, the Company and Mr. Strobbe entered
into a separation agreement that provided for him to receive a cash severance payment of $37,358 and a bonus of $5,000,
to be paid in a lump sum. In addition, Mr. Strobbe’s outstanding equity-based awards granted by the Company that were unvested
on the date of his termination became fully vested and, in the case of options, exercisable. The separation agreement
also includes Mr. Strobbe’s release of claims and certain other covenants in favor of the Company.
DIRECTOR COMPENSATION
Under our current director compensation program,
we provide compensation to our directors who are not employed by us or any of our subsidiaries (referred to herein as “non-employee
directors”) as follows:
Annual Retainer
|
|
$
|
15,000
|
|
Quarterly Meeting Fee
|
|
$
|
2,500 per meeting
|
|
Audit Committee Chair Retainer
|
|
$
|
10,000
|
|
Compensation Committee Chair Retainer
|
|
$
|
5,000
|
|
Nominating and Governance Committee Chair Retainer
|
|
$
|
5,000
|
|
These retainers and fees are paid to the non-employee
directors solely in the form of restricted stock units that generally vest over a one-year period following the date of grant.
The non-employee director awards are typically granted in or around December each year. Non-employee directors may also be reimbursed
for travel, food, lodging and other expenses directly related to their activities as directors.
Under our director compensation program in
effect for fiscal 2018, retainer and meeting fees for Messrs. Benedetti, Graham, Grimes and Weber were granted in the form of restricted
stock units during January 2018 and May 2018, with the applicable dollar amounts being converted to shares based on the closing
price of our Class A common stock on the applicable grant date. Each of these awards is scheduled to vest on December 12, 2018.
Messrs. Carroll and Dolan declined to receive any award grants for fiscal 2018.
In connection with her joining the Board, Ms.
Hansen received an award of 23,475 restricted stock units that is scheduled to vest on July 13, 2019. Because this award was granted
after fiscal 2018, it is considered compensation for fiscal 2019 under applicable SEC rules and, accordingly, is not reflected
in the table below.
Directors who also serve as employees receive
no additional compensation for their service as directors. During fiscal 2018, Mr. Hurst, our President and Chief Executive Officer,
was our employee as well as a member of the Board of Directors and thus received no additional compensation for service as a director.
See the section titled “Executive Compensation” above for more information about Mr. Hurst’s compensation for
fiscal 2018.
The following table sets forth the total compensation paid to our
non-employee directors for their service on our board of directors during fiscal 2018:
Name
|
|
Fees
Earned or
Paid in
Cash($)
|
|
|
Stock
Awards
($)(1)(2)
|
|
|
Option
Awards
($)(1)
|
|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
Marcus Benedetti
|
|
|
-
|
|
|
$
|
26,536
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
26,536
|
|
Daniel A. Carroll
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Paul Dolan III
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Barrie Graham
|
|
|
-
|
|
|
$
|
33,256
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
33,256
|
|
Spencer Grimes
|
|
|
-
|
|
|
$
|
17,632
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
17,632
|
|
Gerry Hansen(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Paul J. Weber(4)
|
|
|
-
|
|
|
$
|
34,999
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
34,999
|
|
|
(1)
|
The amounts reported in these columns represent the aggregate grant date fair value of stock and
option awards granted to the non-employee directors in fiscal 2018. These values have been determined under the principles used
to calculate the value of equity awards for purposes of our financial statements. For a discussion of the assumptions and methodologies
used to calculate the amounts referred to above, please see the discussion of equity-based awards contained in Note 9, Stock-Based
Compensation, to our consolidated financial statements for the year ended June 30, 2018 included in our Annual Report on Form 10-K,
filed with the SEC on October 15, 2018.
|
|
(2)
|
As of June 30, 2018, our non-employee directors held outstanding and unvested restricted stock
unit awards with respect to the following number of shares: Mr. Benedetti, 12,255, Mr. Carroll, 0, Mr. P. Dolan, 0, Mr. Graham,
14,706, Mr. Grimes,8,495, Ms. Hansen, 0, and Mr. Weber, 0. None of our non-employee directors held outstanding stock options on
that date.
|
|
(3)
|
Ms. Hansen was appointed to the Board of Directors effective April 12, 2018.
|
|
(4)
|
Mr. Weber resigned as a member of the Board of Directors effective April 15, 2018.
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets
forth certain information regarding beneficial ownership of the Class A and Class B common stock as of October 19, 2018 (i) by
each person who is known by us to beneficially own more than 5% of the outstanding shares of our Class A common stock, (ii) by
each of our directors, (iii) by each of our named executive officers, and (iv) by all directors and executive officers as a group.
The table is based upon
information supplied by directors, officers and principal stockholders. Applicable percentage ownership for each stockholder is
based on 4,535,750 shares of Class A common stock and 6 shares of Class B Common Stock, outstanding as of June 30, 2018, together
with applicable vested restricted stock units for such stockholders. Beneficial ownership is determined in accordance with the
SEC rules and generally includes voting or investment power with respect to securities, subject to community property laws where
applicable. Shares of common stock subject to restricted stock awards are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options, but are not treated as outstanding for computing the percentage ownership of any
other person.
Name and Address
|
|
Class A
Common
Stock
|
|
|
Class B
Common
Stock(14)
|
|
|
Class A Percentage
of Shares
Beneficially Owned
|
|
|
Class B Percentage
of Shares
Beneficially Owned
|
|
Bard Associates(1)
|
|
|
457,844
|
|
|
|
-
|
|
|
|
10.09
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Star Investment Management Corporation(2)
|
|
|
1,274,271
|
|
|
|
-
|
|
|
|
28.09
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twinleaf Management, LLC(3)
|
|
|
408,106
|
|
|
|
-
|
|
|
|
9.00
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcus Benedetti(4)
|
|
|
15,820
|
|
|
|
-
|
|
|
|
*
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Carroll(5)
|
|
|
38,700
|
|
|
|
1
|
|
|
|
*
|
|
|
|
16.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul E. Dolan, III(6)
|
|
|
4,600
|
|
|
|
1
|
|
|
|
*
|
|
|
|
16.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barrie Graham(7)
|
|
|
68,694
|
|
|
|
1
|
|
|
|
1.51
|
%
|
|
|
16.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spencer Grimes(8)
|
|
|
444,184
|
|
|
|
-
|
|
|
|
9.79
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerry Hansen(9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip L. Hurst(10)
|
|
|
440
|
|
|
|
1
|
|
|
|
*
|
|
|
|
16.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evan Meyer(11)
|
|
|
180,000
|
|
|
|
-
|
|
|
|
3.97
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason Strobbe(12)
|
|
|
130,000
|
|
|
|
-
|
|
|
|
2.87
|
%
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Weaver(13)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (10 persons)
|
|
|
882,438
|
|
|
|
4
|
|
|
|
19.46
|
%
|
|
|
66.67
|
%
|
|
(1)
|
The address of Bard Associates, Inc. is 135 S. LaSalle St., Suite 3700, Chicago IL, 60603. Comprises
of 1,794 shares of Class A common stock in which Bard Associates, Inc. has the sole power to vote or to direct the vote and 457,844
shares of Class A common stock in which Bard Associates has the sole power to dispose or to direct the disposition of, based solely
on a Schedule 13G filed on February 13, 2018 for December 31, 2017.
|
|
(2)
|
The address of North Star Investment Management Corporation (“North Star”) is 20 N.
Wacker Drive, Suite 1416, Chicago, Illinois 60606. Based solely on a Schedule 13D/A filed on August 16, 2018, the total shares
of Class A common stock comprised of 758,034 shares in which North Star has the sole power to vote or to direct the vote, 758,034
shares in which North Star has the sole power to dispose or to direct the disposition thereof and 516,237 shares in which North
Star has shared power to dispose or to direct the disposition thereof. As of August 16, 2018, the following persons were known
to the North Star to have the right to receive dividends from, or the proceeds from the sale of more than 5% of the Class A common
stock of the Company: North Star Micro Cap Fund and North Star 10 10 Fund L.P.
|
|
(3)
|
The address of Twinleaf is 131 Brookwood Lane, New Canaan, CT 06840. The shares are allocated across
nine (9) discretionary client accounts. Such clients have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, such securities. No such client contains an interest relating to more than five percent
(5%) of the class of securities. Mr. Spencer Grimes, as the Managing Member of Twinleaf, may be deemed to beneficially own the
408,106 shares of Class A common stock allocated across the discretionary accounts.
|
|
(4)
|
Mr. Benedetti also holds 12,136 restricted stock units which will fully vest on December 12, 2018.
|
|
(5)
|
The shares of Class A common stock and Class B common stock, and voting power thereof, are owned
by the Carroll-Obremeskey Family Trust u/a/d 15 April 1996, a revocable trust established by Mr. Carroll and Ms. Obremskey. Mr.
Carroll and Mrs. Obremskey are joint trustees of the Trust and each person has the power to vote and dispose of any and all securities
held by the Trust. Both Mr. Carroll and Mrs. Obremskey disclaims beneficial ownership of the shares and options owned by the other.
Does not include 806,596 LLC units, which have the right to exchange for shares of our Class A common stock on a one-for-one basis.
|
|
(6)
|
The shares of Class A common stock and Class B common stock, and voting power thereof, are owned
by the Dolan 2005 Family Trust u/a/d 24 August 2005 and amended 28 September 2012, a revocable trust established by Mr. Paul Dolan
and Mrs. Dolan. Mr. Paul Dolan and Mrs. Dolan are joint trustees of the Trust and each person has the power to vote and dispose
of any and all securities held by the Trust. Both Mr. Paul Dolan and Mrs. Dolan disclaims beneficial ownership of the shares and
options owned by the other. Does not include 774,128 LLC units, which have the right to exchange for shares of our Class A common
stock on a one-for-one basis.
|
|
(7)
|
Does not include 168,168 LLC units, which have the right to exchange for shares of our Class A
common stock on a one-for-one basis.
|
|
(8)
|
Mr. Spencer Grimes, as the Managing Member of Twinleaf, may be deemed to beneficially own the 408,106
shares of Class A common stock allocated across Twinleaf’s nine discretionary client accounts.
|
|
(9)
|
Ms. Hansen holds 23,475 restricted stock units which will fully vest on July 13, 2019.
|
|
(10)
|
The shares of Class A common stock and Class B common stock, and voting power thereof, are owned
by the Hurst Family Trust u/a/d 1 August 2004, a revocable trust established by Mr. Hurst and Mrs. Hurst, husband and wife. Mr.
Hurst and Mrs. Hurst are joint trustees of the Trust and each person has the power to vote and dispose of any and all securities
held by the Trust. Both Mr. Hurst and Mrs. Hurst disclaims beneficial ownership of the share by the other. Does not include 819,114
LLC units, which have the right to exchange for shares of our Class A common stock on a one-for-one basis.
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|
(11)
|
Consists of stock options to purchase 120,000 shares of Class A common stock and 60,000 restricted
stock units, all of which became fully-vested on April 6, 2018 (pursuant to the terms of Mr. Meyer’s separation agreement).
Mr. Meyer’s employment with the Company terminated on March 30, 2018.
|
|
(12)
|
Consists of stock options to purchase 70,000 shares of Class A common stock and 60,000 restricted
stock units, all of which became fully-vested on August 31, 2018 (pursuant to the terms of Mr. Strobbe’s separation agreement).
Mr. Strobbe’s employment with the Company terminated on August 31, 2018.
|
|
(13)
|
Ms. Weaver holds 60,000 restricted stock units that vest in one installment on July 11, 2019 or,
if earlier, upon a sale of the Company or repurchase of a majority of the Company’s Class A common stock.
|
|
(14)
|
Each holder of Class B common stock shall be entitled, without regard to the number of shares of
Class B common stock held by such holder, to one vote for each LLC Unit held by such holder.
|
Equity Compensation Plan Information
We currently
maintain the 2012 Stock Incentive Plan (the “2012 Plan”), which has been approved by our stockholders. The following
table sets forth information with respect to the 2012 as of June 30, 2018.
Plan Category
|
|
(a) Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
|
|
|
(b) Weighted Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
|
|
|
(c) Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
|
|
Plans Approved by Shareholders
|
|
|
208,291
|
(1)
|
|
$
|
0.83
|
|
|
|
350,853
|
(2)
|
Plan Not Approved by Shareholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Totals
|
|
|
208,291
|
|
|
$
|
0.83
|
|
|
|
350,853
|
|
|
(1)
|
110,000 of these shares were subject to stock options then outstanding under the 2012 Plan, and
98,291 of these shares were to subject to restricted stock unit awards outstanding under the 2012 Plan. The weighted-average exercise
price presented in column (b) of the table above does not take restricted stock unit awards into account.
|
|
(2)
|
All of these shares were available for issuance under the 2012 Plan. The shares available under
the 2012 Plan may be used for any type of award authorized under the 2012 Plan, including stock options, stock appreciation rights,
stock awards, restricted stock, restricted stock units and other awards payable in shares of our common stock.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Policies and Procedures Regarding Related Party Transactions
Our Board reviews related
party transactions for potential conflict of interest issues. Our Board has adopted a written related party transaction policy
to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy
covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which
we were or are to be a participant, the amount involved exceeds $120,000 and a related person had or will have a direct or indirect
material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which
the related person has a material interest, indebtedness, guarantees of indebtedness or employment by us or a related person.
Grape and Bulk Wine Agreements
We enter into grape and
bulk wine purchase agreements from time to time with entities in which our executives and/or founders have financial interests.
We have entered into such arrangements with:
|
·
|
Ghianda Rose Vineyard, which is owned by Diana Fetzer,
wife of Paul E. Dolan, III, a member of our Board.
|
|
·
|
Gobbi Street Vineyards, which is partly owned by Diana
Fetzer and Paul E. Dolan, III’s daughter, Nya Kusakabe.
|
|
·
|
Dark Horse Farming Company, which is owned by Paul E. Dolan,
III (75%), and Heath E. Dolan (25%).
|
|
·
|
Premium Wine Storage, which is owned by Paul E. Dolan,
III (33%) and Heath E. Dolan (33%).
|
We believe these arrangements
reflect substantially the same market terms we would receive in transactions with unaffiliated third parties. However, if we fail
to receive market terms for these transactions or other similar transactions in the future, our profits could be reduced.
During the fiscal year 2018, payments of $53,523
and $113,307 to Dark Horse Farming Company and Premium Wine Storage, respectively were made.
Security Agreements and Limited Guaranties
The bank borrowings were collateralized by substantially all our assets. Additionally, certain LLC members
who are also our executive officers and/or directors, as well as certain trusts and other entities under their control (together
the “Guarantors”), entered into limited guarantee agreements which guarantee the payment to the bank of all sums presently
due and owning and all sums which shall in the future become due and owning. The liability of the individual Guarantors ranges
from 23% to 61% of the sum of all obligations due plus the costs, expenses and interest associated with the collection of amounts
recoverable under the guarantee. Subsequent to June 30, 2018 the associated balances were paid in full.
Director Independence
Our common stock is listed
on The NASDAQ Capital Market. As required under the listing standards of NASDAQ, a majority of the members of the Board must qualify
as “independent” as affirmatively determined by the Board. Our Board has affirmatively determined that the following
five directors are independent within the meaning of the applicable NASDAQ listing standards: Messrs. Benedetti, Carroll, Graham
and Grimes, and Ms. Hansen.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
BPM LLP served as our
independent accountant for the fiscal years ended June 30, 2018 and 2017. The following table sets forth the aggregate amount of
various professional fees billed by our principal accountants (in thousands):
|
|
Years Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Audit fees
(1)
|
|
$
|
346
|
|
|
$
|
281
|
|
Audit-related fees
(1)
|
|
|
-
|
|
|
|
-
|
|
Total audit and audit-related fees
|
|
$
|
346
|
|
|
$
|
281
|
|
|
(1)
|
All audit and audit-related fees are approved by the Audit
Committee of the Board of Directors.
|
Audit Fees.
Audit fees consist
of aggregate fees for professional services in connection with the audit of our annual financial statements, quarterly reviews
of our financial statements included in our quarterly reports and services in connection with statutory and regulatory filings.
All audit fees are approved by the Board.
Audit-Related Fees.
Audit-related
fees consist of aggregate fees for assurance and related services related to the audit or review of our financial statements that
are not reported under “Audit Fees” above.
Tax Fees.
Tax fees, which
were not incurred, would include fees for professional services for tax compliance, tax advice and tax planning, primarily, fees
related to tax preparation services.
All Other Fees:
Other fees,
which were not incurred, would include fees for products and services other than the services reported above.
Pre-Approval Policies and Procedures
Our Audit Committee has
established procedures for pre-approval of audit and non-audit services as set forth in the Audit Committee Charter. The Audit
Committee considers whether the audit and audit-related fee provisions disclosed above are compatible with maintaining BPM LLP’s
independence and has so determined that the services provided by BPM LLP are compatible with maintaining BPM LLP’s
independence. The Audit Committee pre-approved audit services provided to us by BPM LLP in fiscal year 2018.